“Markets react when they develop a sense of the costs involved in a sanctions war,” David Kotok, chairman and chief investment officer at Cumberland Advisors, wrote to clients over the weekend. “The U.S., European Union and Russian Federation are engaged in a sanctions war that continues to intensify. There are and will be negative and unintended consequences.”

Mr. Kotok said he is maintaining a cash reserve and defensive positioning in client portfolios of his Sarasota, Fla.-based firm, which manages more than $2 billion in assets. He sees a continued pickup in volatility in the weeks ahead.

“We think that risks are rising for accidents, military interventions, and damage to economic recoveries,” he said. “The world appears to be a very dangerous place. At the same time, we think that the central banks of the world are out of bullets when it comes to additional assistance in case there are shocks.”

Much of that cash found its way into safer substitutes. Investors poured $7.84 billion into money-market funds, Lipper said, which followed three straight weeks of outflows.

After Friday’s rally, the Dow Jones Industrial Average is down 3.4% from its last record high hit almost a month ago. The blue-chip average sits in negative territory for the year.

Some money managers aren’t particularly concerned by the recent pullback. Corporate earnings are advancing at the second-fastest rate since 2011, according to FactSet. U.S. economic data have been improving and valuations look attractive compared to bonds.

But U.S. stocks haven’t been able to generate the same consistent returns this year that they generated in 2013. As long as the geopolitical situation remains unsettled, there’s little reason to think that uneven trajectory will change anytime soon.

Morning MoneyBeat Daily Factoid: On this date in 1992, the Mall of America opened its doors in Bloomington, Minn. It is considered to be the biggest shopping mall in the U.S., attracting more than 40 million visitors annually.

STOCKS TO WATCH

MannKind is pairing up with Sanofi to develop and commercialize its Afrezza Inhalation Powder, a rapid-acting inhaled insulin therapy for adults with type 1 and type 2 diabetes. As part of the agreement, announced Monday, MannKind will receive $150 million.

Priceline Group is expected to report a profit of $12.10 per share on revenue of $2.12 billion early Monday.

Dean Foods is expected to report a loss of 6 cents on revenue of $2.3 billion.

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Kurds Repel Insurgents in Iraq: “Islamist extremists in Iraq made a rare retreat in an area hit by U.S. airstrikes, in an early sign of impact from the American campaign. But the country’s constitutional crisis deepened as the prime minister denounced the president and security forces were deployed across the capital.”

Israelis, Palestinians Agree to Cease-Fire: “A fresh 72-hour cease-fire in the monthlong Gaza war went into effect Monday, but Israeli and Palestinian negotiators faced daunting challenges in reaching a longer-term agreement to prolong the calm.”

U.S. Stocks Remain Unfazed by Tensions: “A summer of geopolitical unrest is rattling markets, but despite a recent downturn, investors’ optimistic view of U.S. stocks has been largely unscathed.”

Kinder Morgan to Scrap Partnerships: “Kinder Morgan is consolidating its vast oil-and-gas pipeline empire into a single company amid investor worries about the enterprises’ growth prospects.”

Erdogan Wins Turkish Election: Prime Minister Recep Tayyip Erdogan swept to a landslide victory in Turkey’s first direct presidential election, extending his 12-year grip on power and securing a mandate to fulfill his pledge of creating a ‘new Turkey.’”